Price to Sales Ratio

In his 1984 best-selling book, Super Stocks, Ken for the first time described in detail a method (among many) his company had been using to value stocks and craft forward-looking expectations. It was the price/sales ratio (PSR)--now a commonly used metric but at the time unused by most investors until Ken championed it. In his view, for many stocks, it was a better tool than more popular valuation methods like the price-to-earnings ratio. In the book, he gives a detailed look at why the PSR was useful, what it was measuring, and how it could be used to better forecast stock price direction.

Ken’s work surrounding the PSR popularized the use of the tool as an indicator for undervalued stocks and is now frequently included as required curriculum for the CFA exam.